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Hypothetically, If I create tokens, I can create liquidity pool in one of the DEXes by adding, for instance, 1000 tokens and 1000 USDT. So the initial price of one token in this DEX will be 1 USDT. But How is this working in centralized exchanges?

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  • $\begingroup$ How does what work on centralized exchanges? $\endgroup$
    – Giskard
    Aug 3, 2022 at 10:23

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The token doesn't get added to the centralized exchange until it already has some reputation and therefore a market price.

But also, centralized exchanges don't use the same algorithm as decentralized liquidity pools. A decentralized liquidity pool offers you a price and you take it (in either direction as you like) or leave it. In a centralized exchange, you make the offers. You can see the current highest bid and lowest ask (and possibly all the ones that aren't), and you can take one of them, or make your own competing offer. The exchange does not choose the price.

Some exchanges have a "convert" feature which behaves more like a liquidity pool ("here's the price; take it or leave it"); this should only be available for tokens with reasonably stable prices, and the price used for this feature is based on the current market price, plus or minus some spread, which is profit for the exchange.

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